Rocky Mountain High? Not when it comes to diesel prices

Diesel FuelingNationally, diesel prices have slowly inched downward in recent months – dropping a cent here and a cent there on most weeks. But in the Rocky Mountain region, the drop in diesel prices has been much more noticeable.

For example, take the week ended Jan. 7. The national average for diesel fuel dropped .07 cents per gallon to an average of $3.911. In the Rocky Mountain region, where the average is $3.688, the drop in price was 5.8 cents. (Note:  the national average is still more than 8 cents higher than it was for the same week in 2012).

What’s responsible for the larger decrease in price in this region? I asked Ben Brockwell, director of data, pricing and information services for Oil Price Information Service (OPIS). He says diesel fuel stocks around the country were far below historical levels for most of the year — about 12 percent behind 2011, but that deficit was running more than 20 percent for most of the fourth quarter.

“To make up the deficit – to build stocks – refiners increased production,” Brockwell says. “Rocky Mountain producers increased production at a higher rate to take advantage of cheaper crude prices that they believe will get more expensive in 2013 as some of the trapped Midwest crude finds its way to the Gulf Coast, with the opening of the Seaway Pipeline, for example.

“Meanwhile, demand for diesel fuel, both regionally and nationally, hasn’t kept pace with this extra production. In the Rockies there is really not much of an outlet to sell these excess barrels. You have to sell them locally. So prices are dropped to try to stir sales.”

Some forecasts call for diesel prices to be slightly lower on average this year compared to 2012. The U.S. Energy Information Administration (EIA) predicts the national average for on-highway diesel to be $3.87 per gallon 2013 – about 10 cents cheaper than 2012.

With supplies certain to tighten in the near future, drivers fueling in the Rocky Mountain region are enjoying a temporary bonus – call it a Rocky Mountain Low.